Call Time On Duty

Now that the smoke has cleared away from Christmas and the New Year celebrations we start to look forward to the late winter and spring tastings put on by our suppliers.  It’s part of the planning process to fill gaps in the list and to discover new lines and new growers, as well as consolidating existing relationships with more familiar faces.  In short it’s time to go shopping and, as it’s the only type of shopping either of us can manage with a smile, it is usually fun.  Sometimes it’s challenging or frustrating, but when we have written off the non-starters and filtered through the shortlist to emerge with a clutch of exciting fresh ideas for the Wines of Interest 2014/15 Wine List, we are confident that you, dear customer, will have plenty to get your teeth into over the coming year.

 Part of that process necessarily involves costing.  Obviously we would like to make a modest turn out of it - you can’t feed and clothe the children by giving it away.  One thing is for certain here and that is that no matter how much we sell, nobody makes more out of our labours than the government and it is the government which makes the major contribution to the expense of your favourite tipple.  Now, we all know that education, the NHS, the armed forces, the police and so on must be paid for somehow and that the principle of paying tax is sound, so we are not griping about excise per se.  Thus as Williamson bashes his calculator and redraws his spreadsheets after the spring budget, we understand why our industry is required to stump up, but what does irk is just how much.  Have a little trundle through some revealing figures to see the extent that we are lent on by No. 11 Downing Street….

Did you know that the wine and spirit industries are worth £20 billion annually to the British economy and support, directly or indirectly, £40 billion of economic activity in the UK?  The UK alcohol industries (ghastly description but you catch our drift) support nearly 2 million jobs in total.  Worth encouraging wouldn’t you think?

Since the introduction of the alcohol duty escalator in 2008 by Mr. Darling, wine taxation has risen by 50% and spirits by 44%, of which 25% for both categories was imposed by nice Mr. Osborne who picked up the baton when it became his turn.  Tax now accounts for 79% of an average-priced bottle of spirits and 57% of an average bottle of wine.  This will increase to over 80% on spirits and 60% on wine if the escalator is retained for 2014.  Don’t forget that every time the excise duty increases as part of our cost, the retail selling price also contains a growing amount of VAT.  You pay a tax on a tax.

As we stand now, the UK accounts for 38.8% of all duty paid in the EU – more than France, Germany, Italy and Spain combined.  Phew!

Next time you hear the talking heads pontificating about the UK’s alcohol problems, putting such troubles down to the cheapness of booze in this country, remember these statistics.

What beats me is just how the constant milking of our industry to this punitive degree squares up with government’s declared intent to create jobs and support growth.  It doesn’t look that way from here.  With the chancellor’s budget booked for March 19^th the spectre of another increase looms large and, as the duty escalator’s rate is set at 2% over inflation, we could be looking at another significant hike.

This is not a partisan, anti-government rant; all the parties of whatever political hue have been equally unsympathetic to our trade down the years.  The fact remains that the UK, whilst apparently enjoying a modest measure of economic improvement, remains pretty well immersed in the proverbial cess pit, wherever you wish to lay the blame for that.  Thus we understand why tax revenues need to be guarded and we understand why the national belt has had to be tightened.  What we don’t understand is why our industry, which shows such obvious benefits to the nation, should once again be clobbered like no other sector that we can think of, which results in the long term stifling of one of our more successful industries and contributors of revenue.

In short, we’ve paid already.  Go and fleece somebody else for a change, George.  Oh, and don’t defer it for a year, DO IT NOW.

If any of you feel similarly but do not know where to express that frustration, please go to http://action.calltimeonduty.com/  hosted by the Wine and Spirit Trade Association and endorsed by The TaxPayers’ Alliance, where you can find out more about this issue and send a pre-prepared, electronic letter to your local MP.  The words and major points are already there for you so please feel free to make your voice heard.  There’s an election in the offing and the current incumbents could do with a splash of popularity so it may well be a good time to nudge the chancellor in this direction.  If he sees sense but leaves it any later and it’ll look like a bribe.

Of course, if you actively wish to pay more for your booze and see further hurdles shoved in front of your favourite pub or restaurant and the vital tourist industry, please feel equally free not to do this…..

(Data sourced from Harpers Wine & Spirit Magazine, January 2014, issue 113)

Cheers George...!

Well, that was interesting wasn’t it! George Osborne is apparently keen to support people who sell and drink beer, but not those who sell and drink wine.  The scrapping of the beer duty escalator in this week’s Budget, whilst very welcome, is only a job half done.  What about scrapping the escalator for the rest of our favourite tipples George?  Not yet it would seem, though I hope that the positive move on beer means that the days of the escalator are numbered.  The Chancellor has two more Budgets before the 2015 general election and any tax giveaways in 2015 will just look like an attempt to bribe the electorate (which I’m sure he’ll try) but to have any credibility the escalator surely has to be axed for good next time round?

Good old George also stressed how he expected the accompanying cut in beer duty to be passed on in full to customers, and presumably he therefore intends that the increase in Excise Duty on other alcohol to also be passed on in full to customers?  Actually, retailers of wine have 3 choices:

1. Pass on the increase.  Simple enough but it’s not just the increase in Excise of course, there’s VAT as well, and this is also the time of year when suppliers put their prices up.  Oh, and have you noticed the exchange rate recently, and the cost of transportation?  All wrapped up together these will combine to add more than the 10p a bottle increase announced in the Budget.

2. Absorb the increase.  The ability to do this largely depends on the variables mentioned in point 1, but we will certainly be looking to keep any increases down to a minimum, or simply look for new lines that offer better value for money.

3. Ask suppliers to absorb the increase in costs.  Actually, this is only really an option if you happen to have your suppliers over a barrel (so to speak) and care more about attractive looking price points than protecting the quality of the wine that goes in the bottle.  As discussed in a previous blog this way is fraught with danger and there cannot be many customers who have not hoisted the message in by now that if you pay peanuts you get horsemeat….

With costs (especially taxes) on the rise, customers have a simple choice: either pay the same for your wine as you always have done (in which case be prepared to drink less good wine each year) or pay a little more to protect the amount that goes on the wine itself from being eaten away by these increases.

Consider our handy illustration of “where your money goes” which we produced last year (with figures from the 2012 Budget).  You can see that there is about 11p worth of wine in a £5.00 bottle with Excise Duty at £1.90.  This year’s Budget makes two changes to these figures; add 10p to Excise Duty (making it £2.00 per bottle) and therefore deduct 10p from the wine element.  It doesn’t leave much wine in the £5 bottle does it!  It’s why you don’t see bottles for sale at £5.00 on our shelves.

If you shuffle that 10p from wine to Excise Duty in the other 3 bottles in the illustration there is still plenty left for the wine element of those.  On the 2012 Budget figures the wine element of 11p in a £5.00 bottle goes up to £1.78 in a bottle at £7.50 – an increase of 16 times.  However, the 2013 Budget leaves us with only 1p of wine in a £5.00 bottle but £1.68 of wine in the bottle at £7.50 – that’s now an increase of 168 times! You can reasonably expect £5 bottles of wine to be significantly inferior pretty quickly.  Some consumers won’t see the difference of course, and will keep buying their £5 bottles, but my bet is that since you’re reading this you probably won’t be one of them.

With the recent duty increase it has never been more important to understand the difference between “cheap” and “good value”.  Put another way, if the only aspect of your purchase that you understand is how much it costs you should beware of the pitfalls.  After all, you wouldn’t buy a car just on price would you? Or a holiday? Or a lasagne ready meal?  Well, not now anyway.  Time to be smart and buy the best wine you can for your budget, and that means that if your budget is £15 you’re better off with 2 bottles at £7.50 each rather than 3 bottles at £5.00 each. It’s just maths really and with 2 bottles instead of 3 your GP will be happy too...

To make best use of your budget we would naturally suggest spending enough on the bit which you drink.  Visit the Wines of Interest website to browse our wide range of wines or visit the Wines of Interest shop and have a chat.  We are always happy to help at Wines of Interest. Buy wine online now - click here to start shopping.

Minimum Unit Pricing "on the rocks"...?

We learn this morning that the government shows “weak leadership” on the issue of a minimum price for alcohol in England and Wales because ministers can’t agree on the policy.  Actually, this is just symptomatic of a government without a working majority rather than indecisiveness; a handful of dissenting voices would be irrelevant with a decent majority in the commons and the policy would probably go through.  The trouble is, that whilst it may be a sensible idea, it’s hardly a vote-winner and is unlikely to appear as a manifesto promise ahead of the next election.

The disagreements over Minimum Unit Pricing (MUP) could still be resolved though since the crux of the problem is not whether it is “fair” but whether or not it will work as a means of tacking alcohol-related health issues.  This is, of course, unknown but the only way we are going to find out is by trying it.  Conservative MP and former GP Sarah Wollaston has now joined us with a call for introducing MUP  for a trial period of 3 years to see whether or not it makes any difference and, if it doesn’t, it can be scrapped.  We suggested this very idea on BBC Radio Suffolk earlier this year.

So far so good you may think, but there is still a problem, and it’s to do with how we measure success (or failure) of the scheme.  In his recent article in Off Licence News Phil Mellows highlights precisely this problem.  He points out that “numbers are essential to the public health approach to alcohol”.  Here is his article in full which is well worth a read.  It calls into question many of the claims made by Alcohol Concern and other similar organisations simply because the figures they use are wrong and simply trotted out as a means of supporting government policy.  It’s not even a matter of opinion, he argues, simply a matter of fact.  We will let you draw your own conclusions.

The main objection to MUP would seem to be that it would penalise moderate drinkers on modest incomes who choose to buy (or can only afford) products at the very cheap end of the market.  This is a valid observation and worth exploring further.  It has been argued that any penalisation of moderate drinkers by price rises on very cheap products would be unfair on consumers, but with the current proposals on MUP, any unfairness is effectively the price that we as a society are being asked to pay for trying to address the problem of alcohol related harm; we simply need to decide whether or not it’s a price worth paying.  It could be seen as unfair to expect a large number of people to pay a bit extra each for a scheme designed to improve the lives of a minority of others, or you could argue that such an arrangement is merely symptomatic of the caring and civilised society that we should be…

In Ipswich there is currently a campaign running called “Reducing the Strength”.  It seeks the voluntary removal of all beers, lagers and ciders from stores in the town with an alcohol volume of 6.5% or over which are sold for a very low price.  In other words, it seeks to target only those products of choice of the small section of consumers who drink specifically to get drunk.  These are drinks designed with only one purpose in mind, to deliver as much alcohol as possible as cheaply as possible.  They are not designed for flavour, or to accompany food, or to refresh, they are simply a means of delivering booze to consumers for whom booze is the only thing that matters.  This is the section of consumers for whom the health risks are greatest, they are frequent and high consumers of alcohol. Might it therefore be worth considering the introduction of MUP on just these products rather than across the board since they seem to be the main culprits?  This would surely show us whether MUP works or not.

The trouble is, the government likes us to drink because of the tax revenue that alcohol brings in, it just can’t say so.  The Chancellor will probably raise Excise Duty again next week, not because he thinks we will drink less as a result, but simply because he needs the money.  He will do it sneakily using words such as “no additional increase” in the hope that this will be widely misreported as “no increase”, saving face whilst he allows the Excise Duty Escalator introduced by his predecessor to automatically raise it by 2% above inflation.

If we’re not going for MUP nationally then local strategies like Ipswich’s own “Reducing the Strength” would seem to be the best bet to tackle the problems caused by low priced booze and we will need to look north of the border to see whether MUP makes any difference.  After all, if it works in Scotland, it ought to work anywhere.